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Federal Reserve Chairman Ben Bernanke’s recently predicted “formidable headwinds” for the U.S. economy. Norris, Perné & French, in the firm’s most recent economic overview, Sound of the Economy, similarly described an economic recovery that is under way, but “hardly the beginning of a period of above-average growth and prosperity.”

However divergent the terminology, the thinking is similar: A weak labor market and tight credit are likely to result in a very slow and plodding recovery, with the prospect of inflation held off for at least another year.

Sound of the Economy author John F. (Jay) Wisentaner reviewed our previous forecasts and determined our prognostications were on target. At the beginning of 2009, Norris, Perné & French looked for continuing bad economic news through the year’s first half, with gradual improvement in the third and fourth quarters.

In fact, the bellwether of the recession’s end, a stock market rally, has surprised Wall Street veterans and observers with its robustness. And continuing conversations and chatter about a meaningful correction of 10 to 15 percent have remained just that to date.

The strength of the market’s rally resulted in an upward adjustment of our S&P 500 target for 2009. The firm’s 2009 forecast:

Real GDP: -1.9 percent

Headline CPI: -0.5 percent

Ten-year treasury range: 3.2 to 4.5 percent

Year-end: 3.8 percent

S&P 500 return: 10 to 15 percent.

The GDP’s growth to 3.5 percent (annualized rate) in 2009’s third quarter provided strong confirmation of improving economic conditions, although a disproportionate share of that growth was driven by the government’s Cash for Clunkers program. This welcome news provided an end to a record streak of four straight quarters of contraction.

Consumer response to government incentives for both home and new car purchases pushed consumer spending as a GDP share to a new high in 2009’s third quarter. And nearly half (42 percent) the GDP growth is attributable to Cash for Clunkers.

This surge is expected to be short-lived. It’s believed that the automotive incentives pushed car purchases ahead, and as a result, consumer spending will weaken in the current quarter.

Although the national unemployment rate dropped marginally in November from 10.2 to 10.0 percent, the situation may be a temporary one and not yet a reversal of unemployment trends downward. Wall Street talks about the technical end to a recession, but until those numbers show a significant positive change that is coupled with easier credit, the recovery won’t be felt on Main Street.

Employers are not yet doing much hiring, choosing instead to increase the hours of workers whose hours had been scaled back. Many executives express minimal inclination to hire aggressively in the new year’s first half, and many executives plan to meet next year’s demands with more productive employees instead of additional employees.

Correspondingly, worker productivity has increased in 2009. In the year’s third quarter, the output of nonfarm workers rose at an annual rate of 9.5 percent. That figure, coupled with the second quarter’s 6.9 percent rate, created the strongest productivity six-month growth rate in 48 years.

Additionally, the lowering of the U.S. dollar has helped increase the competitiveness of American exports, which soared at an annual rate of 21.4 percent in the third quarter.

Businesses continued to reduce their inventories throughout 2009, generating hope that a small increase in demand could boost production and subsequently employment.

The entry into double-digit territory in unemployment during the year’s third quarter marked the first time since 1983 that the country reached 10 percent unemployment. In Michigan, unemployment topped 15 percent, and University of Michigan economists predict that level will continue through 2011.

In the fixed income arena, the Treasury yield curve eased across all maturities, a reflection of lower expectations for growth and inflation. Shorter maturities fell more than longer maturities. Corporate bond spreads tightened in the year’s third quarter, and high-grade corporate bonds enhanced their appeal, thanks to low interest rates in government debt. Municipal bonds performed comparable to taxable bonds.

As described earlier, stock prices continued their robust recovery, with intermittent bouts of volatility as economists and traders analyzed daily releases for signs of recovery. During this most recent rally, the technology sector is leading the way, having missed the last economic recovery from 2002-07. The question remains open as to whether the solid earnings reports and positive leading economic indicators will be sustainable. Some consider the recent surge to be unsupported by fundamentals that include weak revenue growth and high unemployment.

One year ago, Lehman Brothers declared bankruptcy, Bank of America took over Merrill Lynch, the U.S. government bailed out AIG, Ford, Chrysler and GM, and the world watched the largest Ponzi scheme ever unravel. These crises of trust generated a strong consensus for the need for tighter regulation and more transparency. But a government seemingly preoccupied by the complexities and politics of health care reform does not yet seem inclined to respond to the need for restoration of trust in the American economic system.

If the economic turmoil of the last 18 months can result in less gaming of the financial markets — and a more skeptical attitude about corporate management and Wall Street — the markets and Main Street will be much healthier.

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